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Differing Needs – How Companies Source Research Agencies in China

As the global economic recovery continues, an increasing number of companies and organizations are commissioning research on the Chinese market. With a growing number of companies beginning to recognize the commercial importance of establishing a more detailed understanding of the Chinese market, the prospects for b2b research agencies in the country look better than ever.

More than three-quarters of all research enquiries in China come from international companies, with a high proportion of enquiries originating outside of China. Multinational corporations are increasingly commissioning multi-country studies where China is just one location being researched. However, whereas in the past market research was very seldom commissioned by multinational firms from within China, the increased localization of market research to local market intelligence function has meant a growth of research demand from within China itself.

This growing demand for research among subsidiaries or regional headquarters of multinational firms based in China is mirrored by a slowly increasing demand from local Chinese companies for market intelligence. While Chinese firms are reluctant to commission research on the same scale as their Western counterparts, there is nevertheless a growing awareness of the importance of market research in expanding market share and gaining access to overseas markets.

There are some major differences in the way that Western multinationals and Chinese companies source their research agencies. To begin with, the budgets made available for market research by Chinese companies tend to be much lower than Western multinationals. For example, US clients are often willing to spend three or four times as much on an individual piece of research than their Chinese counterparts. Equally, whereas a culture and awareness of market research is entrenched in most US companies, in China there remains an instinct to rely on internal sources and personal contacts to keep up to date with market information and trends.

In terms of planning research, buyers of research in Europe or the US will almost always have a clearly defined set of research objectives, and will very often provide a detailed research brief. Most companies will select an agency from a shortlist of three or four agencies that have experience relevant to the study or a strong reputation for quality. Normally an agency is selected based on a number of factors of which price is only one; experience, reputation, local presence and proposed methodology are often more important than the price.

There is typically a much lower awareness of the whole process and function of market research among Chinese buyers, who are very often in a sales and marketing function rather than market research. There is also often a much higher degree of skepticism about the benefits of research among this ‘sales-oriented’ group and, as such, research agencies have to work harder to promote the very concept of research before work will be commissioned. Likewise, research buyers within China very seldom provide a detailed brief and can seem very unclear on the ultimate objectives of the project compared to companies in the West. Research agencies therefore have to spend a long time trying to understand the background to a piece of research and advising companies on how to most effectively plan and execute the study.

In general, Chinese companies tend to be more cost-oriented than Western firms when selecting a research agency. Although a growing number of Chinese companies take factors such as experience and international reputation into account when selecting an agency, the majority of Chinese companies still tend to use cost as the main selection criteria when choosing a research partner. Cost is a main reason why many research buyers in China still tend to opt for local research agencies, although issues such as language, location and communication also come into play. Unfortunately, this tendency to value price above quality can mean that many companies simply pay for fieldwork and miss out on the strategic value offered by full-service agencies.

Finally, there are also some differences regarding the innate needs of Western and Chinese buyers of research. Whereas foreign companies tend to place an emphasis on the strategic learnings from a piece of research, Chinese research buyers are often more concerned with information that can lead to short-term tactical actions, such as sales leads, competitor pricing information and so on.

There has been a growing diversification in the type of research being commissioned in China. Whereas five years ago the vast majority of research commissioned was for market sizing and assessment, nowadays more and more companies are looking to carry out studies that allow them to differentiate themselves in the market, such as brand awareness, customer satisfaction and new product development studies. As more Western companies become established in China, it is likely that there will be a continued shift towards a wider variety of different research types.

Although China’s economy will continue to offer excellent opportunities for new market entrants, growing competition in the market means that foreign companies are under increased pressure to find ways of securing and expanding their market position. Equally, while demand for research in China from multinational firms will continue to grow, the need for research from Chinese firms is also expected to grow over the next few years as domestic companies are forced to compete with international competitors and as they try to expand into new geographies and markets.

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This project has provided Vocollect with excellent data to feed into our strategy development process. It has fulfilled all our expectations and B2B have been extremely professional, consultative and responsive during all phases of this project.

Vocollect

They were quick and efficient, and grasped the complexities of the subject matter and the political dimensions. The information received was detailed yet clearly presented in a logical format.